Podcast Summary: The Majority Report with Sam Seder — Episode 2495: Decoding Trump's Tariffs & Inflation with Mark Blyth

Release Date: May 12, 2025
Host: Sam Seder
Guest: Mark Blyth, Director of the William Rhodes Center for International Economics, Finance Professor at Brown University, Co-Author of "Inflation: A Guide for Users and Losers"

1. Introduction

In Episode 2495 of The Majority Report with Sam Seder, host Sam Seder engages in a comprehensive discussion with economist Mark Blyth about the intricate relationship between former President Donald Trump's tariff policies and the ongoing inflationary pressures in the United States. The episode delves into the broader economic implications of Trump's decisions, the historical context of inflation management, and potential Democratic strategies to address economic inequality and housing shortages.

2. Current Political and Economic Landscape

Trump's Tariffs and Inflation Impacts

Sam Seder begins by addressing recent economic policies under Donald Trump's administration, particularly focusing on the imposition of tariffs. At [08:08], he remarks:

"Trump has flipped again on tariffs still leaving inflation and recession threat. It's amazing I could do both at the same time."

Mark Blyth elaborates on the scale and uncertainty of these tariffs, noting:

"30% is still a massive tariff. And it's unclear if this is going to cause shipments from China to resume... It's also unclear whether there are businesses in the US that can sustain that bump in 30% cost of goods coming from China."

The discussion highlights the ambiguity surrounding the long-term effects of these tariffs, emphasizing the uncertainty businesses face in planning and investment due to fluctuating policies.

Executive Orders and Health Care Implications

The conversation shifts to Trump's executive orders, including a recent one aimed at prescription drugs. The analysis points out the potential short-term focus of such policies:

"Trump issues a feel good executive order on prescription drugs which will disappear within 31 days."

Sam also touches on Republican healthcare legislation, referencing the Congressional Budget Office (CBO) findings:

"Their nonpartisan CBO found the health provisions in the Energy and Commerce Committee Republicans bill will cut at least $715 billion and will result in 8.6 million more Americans going uninsured."

Market Reactions and Senate Dynamics

Mark Blyth discusses the impact of Trump's policies on the bond market and the broader financial confidence:

"Disciplined Trump basically he broke the bond market."

This section underscores the fragility introduced into the markets due to unpredictable tariff implementations and the potential for increased economic volatility.

3. In-Depth Discussion with Mark Blyth

Defining Inflation: Perceptions vs. Metrics [26:54 - 32:10]

Mark Blyth offers a nuanced definition of inflation, contrasting official metrics with public perception:

"Inflation, the best of our definition, was given by Mrs. Thatcher... it's a rise in the general level of all prices."

He explains the disconnect between how inflation is measured (rate of change) and how it is experienced (levels):

"People are looking at levels of prices... if you're in the bottom 60%, inflation eats away what meager gains they've got."

Blyth emphasizes that official inflation statistics often fail to capture the real burden on lower-income households, who spend a higher proportion of their income on essential goods and services.

Historical Context and Lessons from the 1970s [32:10 - 39:40]

Blyth draws parallels between current economic challenges and those of the 1970s, questioning the predominant focus on monetary policy:

"Milton Friedman's famous line that inflation's always and everywhere a monetary phenomenon... that's the shorthand for what we learned."

He critiques the over-reliance on interest rate adjustments to combat inflation, especially when supply shocks are the primary drivers. Blyth references Alan Blinder's work, suggesting that discrete supply shocks require different policy responses than those traditionally employed.

COVID-19 and Modern Supply Shocks [39:40 - 46:58]

The conversation moves to the impact of the COVID-19 pandemic on inflation, analyzing various contributing factors:

• Supply Chain Disruptions: Increased costs due to logistical challenges and shortages.
• Government Stimulus: While stimulus measures contributed to inflation, Blyth argues they were not the primary cause.
• Corporate Profits: Highlighting the excess profits made by carbon majors during inflationary periods, which exacerbates income inequality.

Blyth posits that the multifaceted nature of modern inflation defies simplistic monetary solutions, calling for a reevaluation of economic strategies.

Interest Rates and Economic Outcomes [46:58 - 50:19]

Blyth discusses the Federal Reserve's response to inflation through interest rate hikes and questions their effectiveness:

"We started this time around, when employment went up, it didn't go down. That wasn't meant to happen."

He suggests that the typical models linking interest rate increases directly to reduced inflation are incomplete, as current economic dynamics exhibit different behaviors compared to past scenarios.

Tariffs as Policy-Induced Supply Shocks [50:19 - 62:35]

Mark Blyth analyzes Trump's tariff strategy as an intentional inducement of supply shocks to achieve re-industrialization. He critiques the practicality and economic wisdom behind such policies:

"Tariffs are a policy-induced supply shock... they are making things more expensive deliberately for this project of bringing industrial economy back to the United States."

Blyth argues that while the intention might be to protect and revive American manufacturing, the resultant economic volatility and uncertainty are detrimental, leading to decreased investment and potential recessions.

Implications for the Dollar and Global Economics [62:35 - 67:52]

The discussion shifts to the broader implications of Trump's economic policies on the global standing of the US dollar:

"Treasuries are information-invariant assets... Trump undercut the confidence in that premise."

Blyth explains how actions undermining trust in US financial instruments can lead to long-term shifts in global economic power structures, including potential moves away from the dollar as the primary reserve currency.

4. Democratic Responses and Strategies

Addressing Inequality and Economic Mobility [70:38 - 78:42]

Mark Blyth critiques the Democratic Party's current stance on economic inequality, highlighting a lack of transformative policies:

"The Democrats have inadvertently become the party of the status quo... there was nothing there."

He advocates for robust strategies to mitigate wealth inequality, such as:

• Expanding Vocational Training: Accelerating the training programs to equip the workforce with necessary skills.
• Increasing Housing Supply: Simplifying regulations to facilitate the construction of affordable housing, thereby reducing housing costs and enhancing economic mobility.

Blyth underscores the importance of deregulation to enable significant infrastructure projects, including housing, which could alleviate economic disparities and stimulate job creation.

The Abundance Agenda and Housing Crisis [73:21 - 78:42]

The conversation delves into the "abundance agenda," a Democratic strategy aimed at addressing scarcity through market and policy interventions:

"Just build houses. It's amazing what would happen if you'd build houses."

Blyth emphasizes the need for comprehensive approaches to expand housing availability, combatting regulatory barriers that inflate housing costs and restrict supply. He highlights the detrimental effects of policies like conservation easements, which inadvertently contribute to housing shortages by limiting development opportunities.

5. Conclusion

The episode concludes with reflections on the intertwined nature of tariffs, inflation, and economic policies. Mark Blyth and Sam Seder underscore the complexity of modern economic challenges, advocating for informed and multifaceted approaches to policy-making that go beyond traditional monetary solutions. The discussion highlights the necessity for strategic deregulation, investment in housing and vocational training, and a renewed focus on addressing systemic inequality to foster a more resilient and equitable economy.

Notable Quotes

• Sam Seder on Tariffs and Inflation:
  "Trump has flipped again on tariffs still leaving inflation and recession threat. It's amazing I could do both at the same time." ([08:13])

• Mark Blyth on Inflation Experience:
  "The poorer you are, the more you spend... If you're shopping at Dollar General and prices go up 10%, you and your family have to have a serious conversation about what you're going to do without." ([28:59])

• Mark Blyth on Supply Shocks vs Monetary Policy:
  "If you think inflation is all about breaking the psychology of rising prices, you jack up interest rates... but according to Blinder and other people, following the supply shock version, you didn't need to do any of that." ([39:36])

• Mark Blyth on Housing Solutions:
  "Just build houses. You need to revamp all your training. And housing these days is very different from housing back then." ([75:23])

• Mark Blyth on Democratic Strategies:
  "The Democrats have inadvertently become the party of the status quo... there was nothing there." ([70:47])

This summary encapsulates the key discussions from Episode 2495 of The Majority Report with Sam Seder, offering listeners a comprehensive understanding of the intricate dynamics between presidential economic policies, inflation, and the broader implications for the American economy.